How to Open a Property Management Office in California

Rental property owners don't want to be bothered by a midnight call about a leaking toilet. As a property manager, your job is to act on behalf of the owner and take care of the tenants. This means prescreening tenants, preparing leases, handling repair calls, collecting rent and more. Property management isn't for the faint-hearted. But opening a management company in California can be a lucrative venture.

Instructions

1. Get a real estate broker's license. California law requires that every property management office have a supervising broker. A real estate salesperson can work as an agent for the broker. But the broker is ultimately responsible for the office and her agents. Contact the California Department of Real Estate (DRE) for a list of college-level courses required before taking the broker's exam (see References).

2. Choose a business type. Decide whether you will conduct business as a sole proprietor, corporation, s-corporation or limited liability company. Consult with a legal representative and tax consultant, as each business type has different legal and tax implications.

3. Apply for a business license. Contact your city or county for business license requirements.

4. Record a fictitious business name. If you are operating under a business name that doesn't include your legal name, a fictitious business name statement must be filed. Contact your county recorder's office for application instructions.

5. Choose an office location. A California property management company can be run from home or a commercial office. Many property managers start off in a home office to reduce overhead. As your business grows, you can move into a commercial office space.

6. Join the local Multiple Listing Service (MLS). The MLS gives agents access to properties for sale and rent within a certain vicinity. As a member of the MLS, you can list properties for rent. Real estate agents and property managers can view your listing and, for a fee, refer a potential renter to you.

7. Advertise your property management business. Contact your friends, relatives and colleagues. Inform them about your new venture and ask for referrals. Set up a website for potential clients. Advertise in online venues and local media, such as the newspaper.

8. Set up a trust bank account for client monies. According to the California DRE, mishandling of client funds is one of the top ten violations found in DRE audits. Client monies, including rent money, can't be commingled with your personal account. An example of commingling is depositing a credit report fee into your personal account when the fee hasn't been paid to the credit agency.

Tips & Warnings

• Join your local Realtor association. Most Realtor association offices sell property management forms, such as leasing contracts and disclosures. The association offers networking opportunities and updates on real estate regulations.

• Real estate law changes constantly. Stay up to date by joining a professional association and reviewing the California DRE website on a regular basis. Audits finding non-compliance can lead to license suspension, fines or legal proceedings.

References

• California Department of Real Estate: Ten Most Common Violations Found in DRE Audits
• California Department of Real Estate: Property Management

Resources

• Department of Real Estate: Licensees
• California Association of Realtors
• California State Chapter of the National Association of Residential Property Managers